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Daily Forex Overview

Thu, Jun 12 2008, 08:48 GMT
by Raivis Zile

Dukascopy Swiss FX Group

Previous session overview

On Wednesday, the dollar declined against the euro and yen, reversing much of its gains over the previous two days, as oil prices rose to near-record levels in reaction to a sharp drop in U.S. crude inventories.

The dollar was then hit by comments from Don Kohn, vice chairman of the U.S. Federal Reserve, who downplayed inflation risks by urging patience with higher oil prices, saying some inflation should be permitted.

Analysts said some of the dollar's weakness Wednesday was merely a technical correction from its big gains Monday and Tuesday.

The euro strengthened against the dollar after a 2 day sell off. The ECB's message that interest rates could rise as early as next month could push the euro higher as yield hungry investors take advantage of a 4% return over 2% paid in the US. EURUSD traded with a low of 1.5448 and a high of 1.5587 before closing the day at 1.5570 in the New York session.

The British pound strengthened against the US dollar yesterday despite weaker economic data. UK unemployment rose to the highest in seven months as jobless claims increased 9,000 to 819,300. This followed a revised jump of 11,200 claims in April, as companies continue to cut workers as growth stalls. GBPUSD traded with a low of 1.9493 and a high of 1.9667 before closing the day at 1.9630 in the New York session.

After hitting a 3 month high yesterday, USDJPY fell as the Dow tumbled more than 200 points. Over the past few days, there has been no cohesiveness amongst the Yen crosses as pairs like EURJPY accelerated while USDJPY retreated. USDJPY traded with a low of 106.56 and a high of 107.76 before closing the day around 106.93 in the New York session.

The Canadian dollar rose against the dollar after both oil and gold prices traded higher. In economic news, Canadian industrial capacity ran at a 15 year low in Q1 hurt by the automotive and manufacturing industry.

The Australian dollar was weaker late Thursday after a shock fall in domestic jobs numbers unwound the recent run up in interest rate expectations and some of the currency's yield attraction.

Market expectation

Several traders saying that EURUSD has breached Fibonacci support at 1.5477 and a break now of the hourly trend line at 1.5383 will be the downside trigger for a minimum decline to 1.5220 or 1.5137 supports.

EUR falling due to players react to French financial minister's comment that the ECB president could change stance on rates after the G8 meeting, suggesting ECB, which widely expected to hike rates as early as July, may keep its rates on hold for months.

USDCHF looks set to move sideways as long as it stays within a recent range between 1.0300 and 1.0450.

Most analysts now see the medium-term risk for the Australian dollar to the downside with the up-until-recently hawkish interest rate expectations likely to pull back further in the days ahead. Initial support for the currency is expected around USD0.93.

The ECB's Bulletin is released along with the Euro zone's April Industrial Production expected to come in flat at 0.0%.

Bank of England inflation attitudes survey is released.

Most important events of the day

Published on  Thu, Jun 12 2008, 08:54 GMT